Healthcare is expensive, and it’s increasingly suffering from overinflation. It seems that, while what we pay for consumer goods has tended to increase at a normal rate, healthcare costs have sky-rocketed in comparison. Quite a few startups have popped up of late that are attempting to bring disruptive vision to healthcare costs in the U.S., like the National Surgery Network, a sort of Hotwire for access to top surgical facilities, and MedLion , a group of doctors in Silicon Valley providing cheap primary to uninsured and insured patients alike, to name a few.

Avado, a startup launching at Disrupt NYC today, is partnering with healthcare businesses like the two mentioned above to provide a “Patient Relationship Management” platform, in an attempt to create a more communicative relationship between patient and doctor by way of “Connected Health Records”. Avado CEO and Co-founder Dave Chase likens Avado to a Salesforce for Healthcare … “with the key difference being that the customer (or patient) is also using the system”.

Chase said that the key motivation for the business is that healthcare works best and costs least when there is a more dynamic partnership between the patient and the health care provider. Through richer and more frequent communication, patients achieve the desired health outcomes set forth in the prescribed care regimen. This includes both a web-based app and an iPhone app.

Chase was formerly a 12-year employee at Microsoft, where he was instrumental in founding Microsoft’s healthcare business, and was a senior consultant at Accenture’s Healthcare Practice, working with more than two dozen healthcare providers and systems. So, given Chase’s background, one might be curious as to the comparison between Avado and Microsoft HealthVault, the platform that lets you store health information from many sources in one online location.

Chase also said that, while Microsoft’s focus has been on large entreprises, or hospitals and health systems, Avado will focus instead on small health providers, like doctors, clinicians, and health coaches, as well as the individual strength. The CEO hopes that Avado will provide a complement to Microsoft’s platform, rather than compete directly with it.

Editor’s note: The following guest post is by David Chase (@chasedave), the CEO of Avado, a healthcare startup that was one of the 30 Battlefield Finalists at Disrupt NYC last week.  Chase was going to publish this on his blog, but we asked him if we could post it here instead to share with everyone.  We didn’t attempt to correct any misconceptions in the post to keep it true to how Chase experienced the event. You can watch his presentation in the video at the bottom of this post

There are many local, regional and global startup competitions that startups can compete in. I’m a big believer in the value of these startup competitions for two big reasons—they are a great forcing function to ship your product and refine your ability to pitch your business. Even if you have no plans to raise money, you will have to pitch your business to achieve your goals.

My startup (Avado) is a Patient Relationship Management platform for health and wellness providers such as doctors, physical therapists, nurse practitioners, health coaches, physician assistants and personal trainers. We decided to pursue the opportunity to compete in the TechCrunch Disrupt startup competition. To my knowledge, it is the most competitive and well-attended startup competition even though I perceived it to be more oriented towards “fun” technology.  Though there’s a consumer aspect to Avado, the primary initial focus is on the B2B aspect (the consumer side has a Connected Health Record that is akin to a Mint/Quicken for healthcare) whereas a large percentage of the Disrupt competitors are only consumer-focused.

Each startup competition has its own selection process. In the case of TechCrunch Disrupt, a triumvirate of Erick Schonfeld (Co-editor of TechCrunch), Heather Harde (CEO) and Michael Arrington (Founder) evaluates the companies after they have winnowed down the first list of companies. My understanding is that two out of the three of them need to greenlight a company to be a finalist. During the course of the TechCrunch Disrupt event, Michael referred a couple times to Erick Schonfeld veto’ing a company. It wasn’t clear whether that was a joke or not, but he appeared to be serious.

We were fortunate to be one of the startups that made the first cuts. The next step was to schedule a demo with Erick. We scrambled to pull together what we thought was a coherent flow. Following the demo, Erick asked some questions regarding our business model and the product. At the end, I asked him for his frank feedback as this was one of our first demos so I knew it was pretty rough. He gave me some very useful feedback. At the end of the call, he said we would hear from someone to schedule a demo with Mike or Heather.

With the benefit of hindsight, my hunch is that the fact that we were very coachable and significantly improved our demo and story-telling was a factor in making us a finalist. The next demo was with Heather (also via the phone/screenshare). I took her through the updated demo and it followed a similar process as my call with Erick. At that point, we were told that we’d hear in a couple days if we’d made it to the finals. As it turned out, it took almost a week.

We received the news we’d been selected via email which, of course, we were elated to receive. The next step was to schedule a visit where we’d receive more formal, face-to-face coaching on our presentation and we’d also incorporate more about our business model and go-to-market plans. My impression is the focus that Erick, Heather and Mike have at this point shifts from a weed-out mentality to a coaching mentality as they want to have as high quality an event as possible. When I took Heather through our presentation/demo, it went ten and a half minutes (vs. the 6 minute target). Since we had a relatively complex product and a dual customer (healthcare provider and consumer), she actually suggested we flip the order around in our scenario to lead with the doctor and then review the patient side of the equation. Her feedback was invaluable to tightening up our presentation. We subsequently took her through a revised presentation/demo that fit well within the 6-minute limit.

From there, it was time for the final preparations and travel to New York. They suggest that one person “drive” the demo while the other person speaks. At that point, I needed to coordinate with my co-founder, Bassam Saliba, so that we were in sync for the demo. We did several practices before we felt satisfied with our synchronization. We also took the precautionary measure of doing screen captures of all of our demo in the event of connectivity issues.

Once we arrived in New York, we went through the scheduled technical run-through on stage. We also found out we were in the second day of “Battlefield” presentations. They grouped the startups into groups of similar companies (e.g., search, location, etc.). We were in the “Disrupting the Real World” group. From reading the program, I was able to review who our judges would be but it turned out two of the four couldn’t make it—I think it had something to do with the Icelandic volcano. One who didn’t make it was Beth Comstock who is GE’s CMO which was unfortunate since GE has a big medical division. I was hoping for someone with domain knowledge since it’s challenging for judges without any domain knowledge to judge whether a B2B startup in an unfamiliar vertical market is taking a sound approach or not.

Finally our time to present came. As fate would have it, our DNS provider decided to play mind games with us. Literally while the company before us was presenting, our site became unavailable which we learned when one of the guys back at the office texted us that there were issues. I had mentally prepared for something like that to happen so I wasn’t too worried. Bassam’s PC was already on stage so he couldn’t test it. Fortunately, I had mine and quickly fired it up. To our pleasant surprise, I was able to get to the site so we rushed from backstage with a minute or two to spare.

You can be the judge of how well we did (see Avado is the Mint for your Personal Health Records. or the video below) but we were generally pleased with how things went. After our presentation, the judges had 6 minutes to ask me questions. I thought all of the questions were reasonable. The main thread of questions were around the dual customer (i.e., patients and providers) approach since that adds complexity and generally startups should focus as much as possible.

The final comment and question came from Bijan Sabet of Spark Capital. He made the point that he didn’t understand why a problem as big as the issue in healthcare we were addressing hadn’t been resolved yet. Bijan followed that with a suggestion/critique that he thought we should just start with the consumer and that would drive the change. While I thought I had a decent response (we are focusing on partnerships with health-related non-profits that span both patient and provider), I kicked myself later for not having the better response. That is, the response to his comment that he was surprised it hasn’t been solved is the very fact that parties have tried to solve either the doctor side or the patient/consumer side but no one had tackled the bridge between the two. The takeaway for other startups is that you can’t anticipate every question so the sooner you start putting yourself out for critique and feedback, the better. Thanks to Bijan’s comment, I believe we can turn what may have been viewed as a weakness into one of our key points of differentiation and strength.

As it turned out, we were part of the group that had the eventual winner (Getaround). They generally picked one company from each of the groups to present on the final day of the event. I predicted from the moment I saw Getaround that they’d be the winner. They had the perfect mix of a tight presentation/demo, they were very well resourced (they’d already received significant funding—enough to ship a Tesla from San Francisco to New York!) and were very similar to a deal that got away from some of the judges (AirBnB). It was fun to see their excitement winning. We felt like we won the minute we found out we were a finalist. While hardly a guarantee of success, winning or being a finalist in any startup competition is a nice seal of approval that can help the business. The coverage we got from the tech and venture capital publications such as TechCrunch, VentureBeat and GeekWire were terrific, since we’ll be fundraising in the future. The VentureBeat coverage was a total surprise.

Would I do it again? No question.

Editor’s note: This guest post was written by Dave Chase, the CEO of Avado.com, a health technology company that was a TechCrunch Disrupt finalist. Previously he was a management consultant for Accenture’s healthcare practice and was the founder of Microsoft’s Health business. You can follow him on Twitter @chasedave.

Imagine something so insidious that it leads to the following: over 750,000 personal bankruptcies per year. In Bill Gates’ recent TED talk, he described it as the factor that is devastating education budgets and is leading to a pitting of old versus young; it impairs U.S.-based automakers by adding a $2000 “tax” on all of their vehicles; many believe it is the primary driver of the jobless recovery. Despite corporate profits being at record levels, many corporations simply aren’t hiring as a result. In the startup arena, it can keep people from moving to a startup.

What is it? Healthcare hyperinflation. It won’t be long before $1 out of every $5 in the U.S. economy is spent on healthcare despite the U.S. ranking 31st in the world in terms of health outcomes. Founded by Dr. Samir Qamar in Monterey, MedLion recently opened a clinic in the heart of Silicon Valley with a model that is revolutionizing how primary and urgent care are delivered (Disclosure: MedLion may become a customer of my company, Avado.com, which is why I am so familiar with it.) Their breakthrough model is enabled by disintermediating insurance companies from their encumbrance of day-to-day healthcare. This allows them to dramatically reduce the cost of day-to-day healthcare.

From the time Dr. Samir Qamar was going through his Family Medicine residency, he knew there was something severely broken the insurance-impaired primary care practices he observed during medical school and residency. The primary care practices he experienced were typical of insurance-centric primary care that is the norm today.

It is a relatively recent phenomenon to have day-to-day medicine paid for through insurance. Unlike all other forms of insurance designed for rare events, insurance became encumbered in day-to-day healthcare (i.e., we use insurance for the healthcare equivalent of getting one’s car tuned up where we wouldn’t dream of using insurance). The result has been what some call a 40% “insurance bureaucrat tax” unnecessarily adding to the nation’s healthcare cost burden.

Fortunately, pioneers such as Dr. Qamar have shown there’s a better way. Dr. Qamar originally setup a concierge medicine practice catering to the well-healed. He remains the House Doctor for the world famous Pebble Beach Resorts. As much as he has enjoyed his Pebble Beach practice, Dr. Qamar wanted to serve a broader population so he opened a practice with a dramatically lower price point. For only $49 per month and $10 per visit, MedLion is able to provide high quality medicine at a price point nearly any family can afford.

In fact, MedLion has plans to open another clinic in 2011 in a farming community in California catering to migrant workers who can have difficulty finding a family physician. Dr. Qamar states, “For the same amount they may pay in co-pays with an insurance policy, we can offer complete primary care without the added cost burden of insurance. We believe that a farm worker deserves access to primary care just as much as an executive at Pebble Beach.”

MedLion recently opened up a clinic in Mountain View, California in the heart of Silicon Valley. It’s apropos to open a clinic in Silicon Valley since technology a critical element of having a high quality at a low cost. Dr. Qamar has received inquiries from doctors all over the country seeking to replicate MedLion’s success. These leading doctors are thrilled to remove the yoke of insurance and work for their patients rather than a faceless insurance company.

Many view what Dr. Qamar is doing as simply going back to the Marcus Welby, MD model of a family physician. It hasn’t been without challenges though. MedLion has spent an extensive amount of time (and attorney fees) on setting up their practice model to avoid running afoul of California’s insurance regulations. States such as Washington and the federal health reform allow for direct primary care practices, but it hasn’t yet trickled down into California – ironic for a state known for innovation.

Dr. Qamar explained, “We hired experienced attorneys including the one involved in writing the law in Washington to ensure we were fully complying with the current regulations, however it would be nice if the folks in Sacramento would follow other states in supporting a model that has the potential to save California citizens billions of dollars.”

States such as West Virginia are ahead of California in supporting the direct primary care model. So much so that they are looking to move Medicaid patients onto this kind of model as a means of improving the health of their population while simultaneously reducing costs.

Part of MedLion’s value proposition has been availability to its patient base. Like many direct primary care practices, they find more than half of their patient interaction is via electronic means, as they aren’t forced by reimbursement rules to have a patient come to their office for something that could be done simply over phone or email. We want to be available for our patients whether they are in the Bay Area, Bali or Boise.”

What’s next? Like the Silicon Valley entrepreneurs MedLion now cares for, he has big plans. Dr. Qamar is focused on rapidly expanding his model by partnering with doctors throughout California and beyond. A past president of the American Medical Association once called the primary care physician the “quarterback of the modern medical team.” Yet, compared to their specialist physician brethren, they are paid like “Special Teams players”.

Dr. Qamar sees a resurgence of the primary care physician where the primary care physician can make a healthy living while not being shackled by insurance bureaucracy. “The gratifying part of being in a practice like ours is we can practice medicine the way we were trained while saving our patients a considerable amount. Many of my brethren in insurance-centric primary care share with me they believe they are only using 40% of their medical training when they are forced to have what I call ‘drive by’ interactions with patients. When they learn about how we practice, they are eager to transition their practices to our model.”

Studies have consistently shown that the higher the percentage a country or a county in the U.S. has patients with a “medical home” (i.e., one has a specific primary care physician they go to), the better the health indicators are. A byproduct of these better health indicators is less money is spent on healthcare. Denmark has had so much luck with increasing primary care that they have reduced the number of hospitals in the country by over half – they simply weren’t necessary anymore.

In the U.S., the early results are similarly promising. That is, by deploying a more primary care centric model, a pilot program is Ohio has shown it can save $500MM per year just in their Medicaid population with diabetes once they scale the pilot. As Bill Gates’ recent TED Talk on State budgets highlighted, these are monies that can remain in education rather than a further draining of education budgets. At a time when Silicon Valley needs more education, not less, this is critical for the future of the industry.

MedLion makes a Medical Home available to virtually anyone regardless of their income. This will help the U.S. match other parts of the world that outpace the U.S. in prevalence of Medical Homes that are so critical to improving the health of the population. Importantly, this will also dramatically lower costs when deployed at scale.

Editor’s note: This guest post was written by Dave Chase, the CEO of Avado.com, a health technology company that was a TechCrunch Disrupt finalist.  Previously he was a management consultant for Accenture’s healthcare practice and was the founder of Microsoft’s Health business. You can follow him on Twitter @chasedave.

As reported on TechCrunch, Google shut down its medical records and health data platform. Since then, there’s been a lot of bits spilled offering explanations, but they all missed the most critical item. Money. Or in the language of healthcare—Reimbursement. I explain more below regarding why Google Health was doomed to fail in light of the legacy reimbursement model.

First, let’s recap some of the explanations offered up so far. These are all valid but miss the biggest point.

Adam Bosworth, who originally ran Google Health gave one reason: It’s Not Social. That’s true if one wants to create a weight management program or is simply interested in fitness-minded folks. Clearly that is important given the obesity epidemic, however there’s vast swaths of healthcare where being “social” isn’t appropriate or applicable in a doctor-patient relationship. In other words, being social is necessary but not sufficient to transform healthcare.

In the comments of TechCrunch’s original article reporting the shutdown, I gave my immediate take…

1. It’s tough, even for big companies, to focus on a bunch of different things. I’m sure they could have figured out how to be successful if it was as strategically important as Search or Chrome or Android or Social…but they have bigger fish to fry.
2. The Health space is a very difficult one. In many ways, it’s counter-intuitive for those who haven’t been in the arena from both the healthcare provider and consumer perspective.
3. As much as there’s a massive consumer-empowerment movement, in order to get ongoing and broad adoption of something in healthcare, one needs to lead with the clinicians.

If you are interested in more, I’ve written about this here.

One of the better analyses was done by John Moore of Chilmark Research.

Few consumers are interested in a digital filing cabinet for their records. What they are interested in is what that data can do for them. Can it help them better manage their health and/or the health of a loved one? Will it help them make appointments? Will it save them money on their health insurance bill, their next doctor visit? Can it help them automatically get a prescription refill? These are the basics that the vast majority of consumers want addressed first and Google Health was unable to deliver on any of these.

As much as we’d like to think it isn’t the case, the fundamental driver of most (not all) behavior in healthcare is the reimbursement scheme. As I described in an earlier piece on the “Do it Yourself Health Reform” movement, I spent much of my time as a consultant in the Patient Accounting departments of heatlhcare providers. The legacy reimbursement scheme can only be described as a Gordian Knot designed by Rube Goldberg.

I expanded on the insidious effects of the reimbursement model in the U.S. in my overview of The Most Important Important Organization in Silicon Valley No One Has Heard About. For those who would like to be optimistic about the reimbursement model changing, read about Health Insurance’s Bunker Buster. In the meantime, it’s critical to understand the current reimbursement model to understand why Google Health failed to transform the landscape.

To understand the impact, I’ll exaggerate to make a point—your healthcare provider doesn’t care about you unless they can see the whites of your eyes. Why is that? Today’s flawed reimbursement scheme only compensates the healthcare provider for a face to face visit. It’s hard to fault the primary care physician who has been put on a hamster wheel of 30-40 appointments per day and can’t even give their practice away upon retirement (that was once their retirement plan) for not wanting to deal with their patients sending email or sharing information from their personal health record.

Interestingly, in the transformative models I describe below, doctors consistently tell me that half to two-thirds of their patient interaction time doesn’t need to be face-to-face. They can deliver high quality medicine without being in the same room as them. Yet, the fee-for-service model causes this country to waste mountains of time waiting to get appointments and then in the waiting room in order to facilitate the face-to-face appointment.

The problem for a company like Google or Microsoft is their success is measured in the tens of millions. Those kinds of numbers are only present in the legacy reimbursement model. Frankly, Google could have done all the right things, but if the reimbursement model doesn’t change Personal Health Records will remain irrelevant for most healthcare providers. At best, we’re seeing Electronic Health Record vendors release so-called Patient Portals that are often driven more by a marketing objective than a clinical objective. Further, they are flawed in that they are a one-way broadcast of the silo’ed information from only one healthcare provider.

Is there any hope for individuals to be more involved in the healthcare system as Personal Health Records promised? After all, it’s clear that healthcare works best and costs least when the patient/individual is a partner in their care with their healthcare provider. Fortunately, I believe that we’re seeing the first waves of a tsunami lapping the shore.

It’s what I call the P.A.C. Tsunami. Patient-centered, Accountability and Coordinated. Today’s flawed fee-for-service reimbursement system is essentially the opposite of those three elements creating all the wrong incentives. In its place, we’re seeing the first waves. Both the Do-it-Yourself Health Reform movement and the government-driven health reform are creating incentives for what are called a Patient Centered Medical Home (PCMH) and Accountable Care Organizations (ACO).

We are already seeing dramatic success with the first editions of PCMHs in the models such as MedLion that were highlighted in The Most Important Important Organization in Silicon Valley No One Has Heard About article. ACOs have the right goals in mind but remain like Unicorns—fantastical beings no one has seen yet and have been described as stupefyingly complex in their design. In contrast, one can’t help but be optimistic when studying the results of PCMHs such as 40-80% reductions in the most expensive facets of healthcare (surgical, specialist & ER visits) or a pilot program in Ohio with Medicaid diabetics that scaled could save Ohio $500 million annually.  Or consider the case of Denmark that was the first country to broadly adopt the PCMH model. It’s been so successful, they have reduced the number of hospitals in that country by over 50% as they simply don’t need that many hospitals anymore.

What does this mean for the tech community? I’d posit that as mobile technologies have fundamentally reshaped voice and data, there’ll be an equally radical transformation of healthcare. Just as legacy telcos had to fundamentally transform themselves or they’d be an artifact of history, so too will healthcare organizations transform (or die). With the transformed healthcare ecosystem, there are requirements for entirely new categories of software that a new generation of startups will develop. Exciting times indeed.

Image credit: Colin Dunn

Dave Chase is the founder and CEO of Avado, a TechCrunch Disrupt NYC finalist. Previously he was a management consultant for Accenture’s healthcare practice and was the founder of Microsoft’s Health business. This is Part I of a two-part post. You can follow him on Twitter @chasedave.

The scale of the Do-it-Yourself (DIY) Health Reform movement is dramatically bigger than I realized when writing about how that movement could affect the Talent Wars taking place in the tech community. So much so that I’m convinced we’re on the cusp of the third, and by far the biggest, major wave of Health IT. The first wave was the introduction of mainframe/minicomputer based departmental solutions. The second wave was characterized by client-server systems and a greater degree of integration across the healthcare enterprise, though still limited between healthcare organizations.

Neither of the first two waves dramatically altered the landscape for healthcare. In contrast, the third wave will fundamentally alter the competitive landscape. Healthcare’s hyperinflation has ignited the DIY Health Reformers to declare what amounts to a Declaration of Insurance Independence. While the reformers recognize insurance plays a vital role for managing high risk events (house fire, car accident, cancer), the fee-for-service model underlying insurance in day-to-day healthcare has created what translates into a 40% “insurance bureaucrat tax” that they want freedom from.

Protesting Healthcare Taxation With Bureaucratization

The summary of the Declaration of Insurance Independence is as follows:

Healthcare’s perverse incentives and an accompanying stifling bureaucracy driven by encumbering day-to-day healthcare with insurance has caused hyperinflation that is crushing family, employer and government budgets and holding back job growth. This must be stopped. Citizens and healthcare providers are doing exactly that, however counter-productive insurance regulations are impairing the ability to expand upon health plans shown to reduce costs by 40% or more.

We, therefore, declare that:

• the United States are, and of Right ought to be Free and Independent of insurance and self-sufficient in accessing day-to-day healthcare;
• that they are Absolved from all Allegiance to insurance bureaucracy;
• and that all insurance connections involving the purchase of day-to-day healthcare, are and ought to be totally dissolved;
• as Free and Independent States they have full Power to explore the range of more effective ways of accessing day-to-day healthcare, and to do all other Acts and Things which Independent States may of right do.

New Care & Payment Models Spurring New Health IT Categories

The exciting thing for the tech community is it will transform a moribund sector of technology (Health IT) by catalyzing entire new categories of software required by the new care and payment models that the DIY Health Reformers are aggressively pursuing. At the time I wrote the DIY Health Reform piece, I was aware of some of the innovative new models and organizations. I’ve since learned of far more and that is amplified by traditional powerhouses in Insurance and Pharma establishing new divisions to pursue the fundamentally altered landscape (e.g., insurance companies setting up multiple lines of business that are non-insurance offerings focused on wellness; 97 new initiatives in the Pharma industry in 2010 to pursue what they call “Pharma 3.0” which is focused on outcomes rather than pills).

Interestingly, I learned that at least one of the biggest insurance companies is already doing what was laid out in the DIY Health Reform piece. That is, for the insurance company’s employees they use health insurance what it’s best for — covering rare items that don’t happen to most people — while complementing that with a Health Savings/Reimbursement Account that uses pre-tax dollars to pay for day-to-day healthcare items. Progressively, employees learn the paradox of healthcare — spending more on healthcare often leads to worse outcomes.

Cautionary Tales For Healthcare Companies from Telco and Newspaper Industry

Just as mobile technologies have fundamentally reshaped the telecommunications industry, there’ll be an equally radical transformation of healthcare. Legacy Telcos had to fundamentally transform themselves. Those that didn’t became an artifact of history. With the transformed healthcare ecosystem, there are requirements for entirely new categories of software that a new generation of startups will develop. By definition, current Health IT is designed for the legacy care and payment models and thus don’t effectively support the new models.

The new models have demonstrated compelling results unheard of in healthcare where health outcomes are improving while costs are being dramatically reduced. One can’t help but be optimistic when studying the results of Patient-Centered Medical Homes (PCMH). For example, there’s been a 40-80% reduction in the most expensive facets of healthcare (surgical, specialist & ER visits) in one group of 3,000+ patients that mirrored the population as a whole. Further, a pilot program in Ohio with Medicaid diabetics that scaled could save Ohio $500 million annually. Or consider the case of Denmark that was the first country to broadly adopt the PCMH model. It’s been so successful, they have reduced the number of hospitals in that country by over 50% and are projecting another 40% reduction as they simply don’t need that many hospitals anymore.

There’s a striking parallel with the newspaper industry during the rise of the Internet in the late 90’s. While they should have been aggressively transforming themselves into modern digital media enterprises, many were investing in new capital infrastructure such as printing plants. Just as printing presses and delivery infrastructure are the most expensive way to deliver media to consumers, the current “arms race” of building new hospitals and healthcare facilities is the most expensive way to deliver healthcare.

The newspapers saw digital as an adjunct sidelight to their core business rather than the future.  Likewise many health systems are taking steps such as acquiring medical practices and bolting on so-called “patient portals” primarily to support/defend their acute care facilities instead of as a fundamental rethinking of what value they bring to the community. If ever there was an industry that should understand that it’s far more effective to treat the underlying “disease/condition” than to treat the “symptom,” it should be healthcare. For a chuckle, watch videos of how air travel or a coffee shop would work if they were like healthcare to see how absurd the legacy model is working in healthcare. Fortunately, the innovators are rethinking, rather than tweaking healthcare delivery.

In Part 2, I will outline the following:

• Convergence of Factors Driving Industry Disruption
• More Time Spent with Patients Translates to Better Health Outcomes and Less Time & Money Wasted
• Implications of Government-driven Health Reform
• Time for Health IT Entrepreneurs/Investors to Jump Back in the Water

Back in May, Avado was chosen as a finalist at TechCrunch Disrupt in NYC. The startup’s ambition was, said in reductive terms, to become the Salesforce.com of personal health records. (You can read our initial coverage here.) In other words, like Salesforce’s “customer relationship management” (CRM), Avado is building a “patient relationship management” (PRM) platform in an attempt to create a more fluid and communicative relationship between patients and doctors — by way of connected health records.

The future of medical practice, Avado CEO Dave Chase says, is very clear: “It’s about being accountable and patient-centric”. The old model for care providers was do more and bill more, but today those who pay for health care, from private insurance and government to consumers themselves want to pay when their health goals are achieved — today it’s about patient satisfaction. Thus, core to Avado’s value proposition is that, through richer and more frequent communication, patients are far more likely to stay healthy and actualize the steps set forth in a care regimen prescribed by doctors.

Since Disrupt, Avado has been working on building out that robust (and freemium-modeled) communication platform for care providers and their patients, and, today, Avado is officially coming out of beta to launch its service to the public. With this full-scale launch comes a number of free products that make up the basis of its freemium platform, all of which are geared towards facilitating that more active communication. For starters, Avado is launching a secure, HIPAA compliant messaging service that patients and healthcare providers can use to safely communicate without violating HIPAA.

Avado’s platform will also include a broadcast publishing engine, that Chase likens to Yammer, in that it functions as a tool that allows healthcare providers to publish content to a targeted group, like fellow staffers, or more broadly, to their public website or Twitter and Facebook, for example. The practice can also choose to publish to groups of patients, like female patients over 18 years old, or those with Diabetes, and so on.

What’s more, with its “Live and Interactive in 55” program, Avado will provide practices with an interactive website that includes secure messaging, a private social network, and patient portal that can be up and running within 55 minutes of sign up. Chase said that, with no cost and minimal time involved for practices, these healthcare providers no longer have an excuse to offer an abysmal website and user experience. With a workable website and electronic medical records, practices will already be well on their way to becoming more patient-centric, interactive, and, well, modern.

Avado will enable practices to claim their accounts in Avado’s namespace, where, Chase says, there will only be one “drjohnson.avado.com”, for example, and unlike domain names on the web, Avado won’t allow squatters, and namespaces need to be kept active, or it will be released back into the wild.

While the above are free features Avado clients will be able to take advantage of for free, the startup will be charging $100 per month per clinician.

As to how Avado is working for businesses, Dr. Samir Qamar, the founder and CEO of Medlion, a group of doctors in Silicon Valley providing cheap primary care to uninsured and insured patients alike, says that the company has been in the process of licensing its model to doctors all over the country.

But, to do so, it needed a software platform that combined the tools of an insurance-based practice (like the generation of ICD-9 codes for creation of super bills) with those of a direct primary care practice (a system that allows for secure patient-to-practice interaction). Qamar also said that they wanted a system that implemented scheduling and electronic medical charting to save on overhead and everything in between.

For businesses like Medlion and Organic Medicine Now (two of the startup’s early customers), Avado offers a pretty handy solution. For practices, having the ability to customize a cloud-based software package around their specific criteria is huge — it’s a big time and money saver, and therein lies Avado’s value proposition.

Aggregating data including past and future appointements, lab results, immunizations, surgeries, etc., along with allowing you the consumer to enter your own data, manually or by way of health gadgets? Pretty cool.

For more on Avado, check them out at home here. Dave Chase, Avado’s CEO, is a former a 12-year employee at Microsoft, where he played a key role in founding Microsoft’s healthcare business. He then went on to act as a senior consultant at Accenture’s Healthcare Practice, working with more than two dozen healthcare providers and systems. Chase has become a spokesman for best practices for healthtech companies, and you can read his guest contributions to TechCrunch here, where he describes both Avado and the problems facing the healthcare industry in more depth.

Editor’s note: This guest post was written by Dave Chase, the CEO of Avado.com, a patient portal & relationship management company that was a TechCrunch Disrupt finalist. Previously he was a management consultant for Accenture’s healthcare practice and founder of Microsoft’s Health business. You can follow him on Twitter@chasedave.

In several of my past pieces, I have written about the importance of a disruptive model of care and payment called Direct Primary Care (DPC) such as The Most Important Organization In Silicon Valley That No One Has Heard About. As the DPC models scale, they become a great option for individuals and small business. However, larger organizations have another option at their disposal that I’m as excited about as the DPC models.

Employers fed up with the annual “get less for more” health story when they get annual health plan updates have taken matters into their own hands. This has created one of the hottest sectors of the economy — onsite clinic providers. These are companies providing corporations with primary care onsite at employer workplaces. Each of the onsite clinic provider CEOs (e.g., Concentra, CareHere) I have spoken with have shared that their business is growing 100% annually. Reportedly 20% of employers with over 500 employees are implementing onsite clinic programs.

Faced with healthcare’s hyperinflation which is hurting their competitiveness, employers have been trying an array of solutions. Led by IBM’s study of their $2 billion annual health expenditure, the overwhelming evidence comes to a surprisingly simple conclusion: more primary care = healthier population = less money spent. Ben Franklin was right. An ounce of prevention is worth a pound of cure. Time and again, it’s been shown that proactive primary care can reduce the most expensive downstream healthcare costs — surgeries, scans, emergency department and specialist visits — by 40-80%. Rather than waiting for small issues to become full-blown medical incidents, proactive primary care can make a big difference.

These disruptive onsite clinics are proving that employers don’t have to endure the “get less for more” program anymore. Larger employers are finding onsite clinics have the same cost and health benefits as DPC models, but it goes beyond just direct costs. The good news for startups is the onsite clinic providers aren’t entrenched with old technology and almost comically convoluted and interminable decision processes at traditional healthcare providers that have prevented innovative technologies from gaining a toehold.

Where do the savings come from?

In the U.S., we tackle healthcare in a way that would be the equivalent of having the best firefighters and firefighting equipment in the world and then paying them more if there were more fires. Thus, you might find firefighters implicitly encouraging kids to play with fireworks on dry hillsides and allow buildings to be built with only one exit and no sprinklers. Even today, many hospitals measure their occupancy like a hotel. That is, higher occupancy is perceived positively similar to the fictional firefighter hoping for more fires so they get paid more. Instead, the key to slaying the healthcare cost beast is to view expensive interventions such as hospitalizations (other than child-birth) as a failure rather than something to be optimized. In the “do more, bill more” model we’ve been afflicted with, we get exactly what we reward. That is, full-blown medical conflagrations that are lucrative for healthcare providers but devastating to healthcare budgets that we all ultimately pay for directly or indirectly.

One other benefit employers realize with onsite clinics is that their employees aren’t wasting half a day going to a doctor’s appointment. Not only is the clinic nearby, but the need to even go to the clinic is reduced. In the flawed fee-for-service model, a doctor can only be paid if you visit their clinic. Not surprisingly, many doctors will optimize for the patient to come to their office as frequently as possible as it allows for more billing events. In contrast, DPC and onsite primary care physicians share the fact that as much as 2/3 of clinic visits don’t require a face-to-face encounter. Rather, phone or electronic communication is sufficient. For example, one doctor shared how he hasn’t seen a patient with Shingles in 5 years. These patients simply take a photo with their camera phone, email it to him and he can easily tell it is Shingles. He can then call in a prescription saving everyone time and money.

Fortunately, onsite clinic providers aren’t incentivized by convoluted health reimbursement models that reward the most expensive care possible. Both DPC and onsite clinic models are rewarded for value and outcomes, rather than mere activity. Further, the smartest of these recognize who the most important member of the care team is — the individual. After all, the individual is the only person who goes to 100% of their appointments and the 99+% of their life spent away from the clinic is when they return to or maintain their health. Having implemented HealthIT systems in dozens of health systems, it’s evident from a systems perspective that the patient is treated as a vessel to attach billing codes to rather than an equal member of the care team. It should be no surprise that legacy HealthIT is optimized around the flawed model, rather than the new models. Entire new categories of software emerge as healthcare providers recognize the most important member of the care team has largely been ignored.

The organizations that treat the individual as a member of the care team practice a “Collaborative Care” model that is making a real dent in healthcare costs. For the more difficult issues such as obesity and substance abuse, the Collaborative Care model extends to other care providers. In other words, not only is the patient-provider connection important but the provider-provider connection is also critical.  For example, after a few years of trying various approaches, a large media company’s onsite provider assigned health coaches to their employees and had rewards and penalties for following care plans. The coaches coordinate between the primary care physician (who is also rewarded for individuals sticking to care plans) and the individual to great effect. There’s the dual win of a healthier employee and less money spent. Emerging technology solutions are making this much easier so the entire care team (individual, coach and doctor) are in sync to achieve the health goal.

The most successful onsite providers are rewarded for being patient-centered, accountable and coordinated. In contrast, the flawed “do more, bill more” reimbursement model that is still pervasive implicitly rewards a provider-centric, unaccountable (e.g., it’s good news when a sick patient comes back more frequently) and uncoordinated model. For traditional healthcare providers, they should heed the warning that providers are making newspaper industry mistakes. As more employers learn of the great benefits from a well-executed onsite clinic model, they will continue this Do it Yourself Health Reform trend that is happening one employer at a time.

Editor’s note: This guest post was written by Dave Chase, the CEO of Avado.com, a patient portal & relationship management company that was a TechCrunch Disrupt finalist. Previously he was a management consultant for Accenture’s healthcare practice and founder of Microsoft’s Health platform business. You can follow him on Twitter @chasedave.

A group of women is re-entering the workforce today and reshaping how products are made across key tech sectors like health & wellness, commerce and social products. Not only do they have the experience of raising families, but they’ve been business and technology leaders earlier in life. They’re becoming founders and leaders at startups and in the very companies they’ve been buying products and services from.

Not only do women make most of a family’s health decisions but 48% of graduating physicians are women and women compose 73% of medical and health services managers. As a healthtech startup, we think heavily about the importance of what I call the Family Chief Health & Wellness Officer (aka “Mom”). Avado is not unlike many startups in that we have two male co-founders.  We’d be fools to not figure out ways to bring the female perspective into our business.

A bootstrapped startup such as Avado has many challenges, but it also possesses some key advantages. I want to share one key advantage related to this topic. I think it may be one of the biggest untapped reservoirs of talent. The beauty of startups is results matter much more than rigid hiring practices. Big, dumb companies often have rules that preclude a huge category of the potential workforce from being tapped. It’s a category that I’m familiar with as my wife was previously a marketer at Apple and Microsoft, yet it’s likely neither would hire her right now as her time commitment with our kids during the day doesn’t allow her to show up during a normal work hours. However, we get the benefit because she is able to help us with our marketing in the windows of time she has.

Another thing dumb employers do is look at gaps in “normal” employment as a big drawback. Let me give you an example of a new member of our team that we are absolutely thrilled to have on board. Julie Braman is our new Managing Director of Innovation for Pharmaceutics and Biotech. She and I worked together when I was running Microsoft’s health business and she was the founder of another industry business – pharmaceutics. Julie chose to stay at home while her kids were growing up. As I know with my wife, that hardly means one’s brain shuts down. Rather, it brings an entirely new perspective the business can benefit from. In fact, perhaps the most important trend in healthcare and the focus of the recently rolled out Stage 2 of Meaningful Use is “Patient Engagement.” As a member of the “sandwich generation,” many former professionals turned stay-at-home moms not only have had responsibility for their children but many are also increasingly responsible for their parents’ health. This gives them a particularly unique perspective. Since patient engagement is our central focus, the perspective of a boomer female head of household is invaluable.

Having Julie join the team is a real win-win. She is able to jump back into a very meaty job without skipping a beat. For Avado, it’s a no-brainer. Julie was one of the pioneers in bringing pharmacists into active engagement in primary care practices while she was a practicing pharmacist at Group Health — this is a rapidly growing trend with the shortage of primary care physicians. Julie was also in Sales with pharma giant, Eli Lilly, so she understands that perspective as well. As Life Sciences has proven to be fertile ground for Avado, I couldn’t think of a better fit and I couldn’t care less that she’s been “out of the workforce.”

Julie is far from unique. Brad Feld, Fred Wilson and others have written about the lack of women in tech yet there is a group of tech veterans re-entering the workforce that are an untapped reservoir. While many of my female colleagues continued working full-time, there are a boatload of them who either worked part time or were full-time Chief Health & Wellness Officers. Their kids have grown up and they are ready to fully re-engage with the workforce. They worked for the defining companies of the 90’s such as Apple, Intel, Microsoft, Oracle, Sun and others that were the Facebooks and Googles of their time. In other words, they were the cream of the crop then and they are the cream of the crop now. We feel lucky have them join our team and think other startups would be just as lucky if they learn how to engage this untapped reservoir of talent.

Related Articles:

What Pharma Can Learn From the Railroads and IBM

Aetna: The Company Scaring Its Competition And Delighting Startups

Healthcare Disruption: Pharma 3.0 Will Drive Shift from Life Science to HealthTech Investing (Part I of III)

Seventeen years after its inception, WebMD remains one of the go-to resources for basic health and diagnostic information (and hypochondria enablement) on the Web. Born at the height of the Dot-com Boom, WebMD is on a very short list of companies that were able to not only endure the ensuing crash, but go on to achieve profitability, a billion-dollar market cap and maintain their position as a market leader — even today.

It’s been a bumpy road for WebMD, however, and the potholes ahead aren’t getting any smaller. As the transformation of the healthcare industry accelerates, the threats to WebMD’s business and its position atop the food chain have begun to multiply. Though WebMD announced today that its health network saw 138 million unique visitors per month and total traffic of 2.95 billion page views during the third quarter — after reporting its first profit in six quarters in July — its popularity has wavered over the last decade. At times, WebMD has been more punchline than pioneer.

Adapt Or Die

Today, WebMD is primarily known for its consumer-facing health and diagnostic web portal and mobile apps. When you think of WebMD, you think of its classic symptom checker, where you can enter in keywords like “runny nose,” whereupon it will serve you with possible diagnostic matches. However, over the years, the company has been quietly diversifying, adding services that allow it to reach new audiences.

Through Medscape, for example, the company offers medical news and information to healthcare providers through its registration-based portal and apps. In turn, WebMD has also begun to target employers and health plans with its subscription-based patient engagement platform and private online health portals, which give employees a secure gateway through which they can access their personal health information, plan data and insurance claims.

WebMD 2.0: From Media To Tech

While WebMD has build a solid foundation around its flagship health information site, each of these services still live apart from each other. As people continue to adopt and become comfortable using a wide range of digital health tools, the opportunities for patients and healthcare providers to connect and communicate, for patients to take control of (and better monitor) their healthcare will increase exponentially.

If WebMD is going to continue to be a part of the conversation in the emergent HealthCare 2.0 Era, it’s going to have to step up its game and adapt to these changes.

What’s more, WebMD has business model that’s very much centered on advertising. Where the pharmaceutical industry goes — its primary source of advertising dollars — so goes WebMD. But, as the company looks to close the gap between its consumer-facing apps and services and its provider-facing portal by allowing doctors to push content to their patients’ phones, for example, opportunities begin to present themselves. By giving doctors the ability to prescribe educational material and content across apps, stepping into personalized healthcare information services and behavior change, WebMD could be able to reduce its reliance on advertising.

Looking forward, WebMD will continue to deliver its core media services, but perhaps more critical to its survival will be the process of redefining itself as a health technology company. To do so, WebMD took its first step in that direction today with the announcement that it will be acquiring TechCrunch Disrupt finalist and the maker of “Patient Relationship Management” (or “PRM”) software, Avado.

Avado And Patient-Focused Healthcare

Like healthcare itself, WebMD has historically tailored its products to address the two very distinct “worlds” within the system: The consumer world and the professional world. Traditionally, it was as if these two divisions were separated by 30+, New York City blocks. With its first acquisition in five years, WebMD is looking for Avado to both metaphorically and physically become the connective tissue between its offices and between its customers — consumers, patients and doctors.

Since launching in 2011, Avado founders and Microsoft veterans Dave Chase, Bassam Saliba and John Yii have sought to do for healthcare and personal health records what Salesforce has done for Customer Relationship Management (CRM). [Disclosure: Dave Chase has contributed a number of articles on the HealthTech space to TechCrunch over the years.] The idea, Chase says, has been to increase the level of connectivity between healthcare providers and consumers to make the delivery of care more efficient and improve patient outcomes.

“The timing is right,” WebMD CTO and COO Bill Pence tells us. “Traditionally, patients and healthcare providers have lived in separate silos, but with the growing adoption of electronic health records and mobile devices, coupled with the advance in sensor technology, there are now more opportunities than ever before to connect the two and offer personalized, direct-to-consumer services.”

The Road Ahead

While the companies aren’t yet ready to talk about the new products that are on the roadmap in the wake of the acquisition, Pence did say that these products will directly integrate Avado’s technology. Beyond that, as to what will become of Avado once it’s folded into the WebMD ecosystem, Chase says that Avado will take up residence within WebMD’s technology team, currently a small but growing portion of the company’s 1,600 employees.

Avado founders Chase and Saliba will be staying on after the acquisition, and will be reporting to Pence. The other members of the Avado team will also join WebMD’s tech team and will remain at their company headquarters in Seattle.

While the two companies declined to share details in regard to the terms of the acquisition, TechCrunch sources close to the deal said that the price fell in the $20 million to $30 million range and was a positive outcome both for the founders and for its investors. Avado raised $1 million back in March from investors that include The Partnership Fund for New York City and healthcare angels like Andy Palmer and QxMD founder Dr. Daniel Schwartz.

Though Avado managed to secure outside investment and attract “hundreds” of healthcare provider customers and “many thousands” of consumers, its traction is minuscule in juxtaposition with WebMD. While WebMD may not be the sexiest brand in healthcare, it reaches the largest audience of health-focused consumers and healthcare providers in the U.S., Chase said.

And therein lies the real value of this outcome for Avado — the opportunity to not only help WebMD in its plans to build the “Health Graph” and integrate its technology into a larger suite of connectivity and patient-empowerment services, but reach an audience of (hundreds of) millions.

On the other hand, while WebMD finds itself back in the black and holding fast to its position in the market, the online consumer healthcare pioneer is at a crossroads. Yes, they have a long reach, but without talent that can help it build third party ecosystems, WebMD risks missing a big opportunity.

WebMD is eager to reposition itself and transform itself from a digital media company to a health technology company, and, in particular, become a true patient engagement platform. Avado believes it can help WebMD shave two years off of that transition. Integrating Salesforce-like patient empowerment software (and APIs) into its portfolio and infrastructure are the first real step in that new direction.

For more, find the acquisition announcement here.